Do the rich REALLY pay less than the middle class??

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re:

by justthefactsmaam

Sep. 29, 2011 6:38 am

No they don't. This is from USA Today. It's NOT from Fox or Wall Street Journal.

Here's a quick summary:

"There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that's less than 1% of the nearly 237,000 returns with incomes above $1 million."

and

"The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4% of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9% in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3%."

Comments

re: Do the rich REALLY pay less than the middle class??

by Bad Company

Sep. 29, 2011 6:50 am

Thom has presented the tax analysis arguments against this and I will not bother rehashing them. The point should be whether they deserve the wealth they have to begin with by an objective standard whatsoever. And when I say objective standard that does not include the idea that they gather the wealth because they can. That is not a standard whether welth and value gather is proportionate to that which is produced in the market. The left has much of the tax idea wrong since it attempts to deflate wealth after the fact. The emphasis should be placed on limiting wealth aggregation in the first place

re: Do the rich REALLY pay less than the middle class??

by .ren

Sep. 29, 2011 7:02 am

Wow. That "Joe Friday" report just changes everything. Let's all stop complaining as many of us live in abject poverty and eventually just starve to death while the tiny percentage of rich continue to own more and more, the rest of us less and less. It's a wonderful world after all! The "liberal" news is lying!

re: Do the rich REALLY pay less than the middle class??

by Recovering cons...

Sep. 29, 2011 7:04 am

Please tell me how the only tax any one pays is Federal Income tax. You have to look at TOTAL TAX BURDEN not just income tax. I am so tired of hearing that 51% of population doesn’t pay income tax but they pay every other tax. So let’s get off the fox talking point of income tax and talk about total tax. Let us talk about total tax fairness. Below are some reference about TOTAL TAX BURDEN.

The U.S. tax system is slightly progressive when including all forms of taxation. But not nearly as much as some people think when they consider only federal income tax rates which are far more progressive than the total tax burden which includes sales, state income, property, gasoline and other state and local taxes.

We must also consider that the wealthiest individuals have ways of sheltering income from tax altogether through the use of complex overseas accounts, loopholes, specialized credits and the like. Lower income people don't have accountants and lawyers on retainer for this purpose, of course. And the total tax burden picture is different from state to state.

As a result of these things, the actual picture is likely to be even less progressive than the modestly progressive system shown here, especially in states like California which depend heavily on sales tax revenues which tend to have greater proportional impact on lower income individuals and families.

The chart was originally produced in 2005 but was updated earlier this month.

If you've complained that your property taxes are rising while lawmakers in St. Paul hold the line on income taxes, you now have documentation in a new study [PDF] the Minnesota Department of Revenue released on Wednesday.

The income tax made up 35.2 percent of all the state and local taxes we Minnesotans paid collectively in 2008. That was down from 37.4 percent in 2006. It is on track to fall even further — to 35 percent in 2013.

But here's what happened in the meantime: Property taxes made up a good share of the difference, increasing from 30.1 percent of our total tax bill in 2006 to 32.1 percent in 2008. They are projected to rise to 33.1 percent in 2013.

Ok, here's where I do my best to put some numbers down on business tax incidence on individuals.

First topic: state payroll (FICA, UI) taxes paid by employers. Half of all FICA taxes (SSI &medicare) are paid by the employer. Almost all of that tax burden is considered to fall on the employee in actuality since it tends to just come out of their wages. 6.2% SSI, 1.45% Medicare, 0.8% UI. Total: 8.45%

Now, since we're talking about those who pay the highest percentage and total of taxes (we're assuming that that is the top bracket, although it doesn't seem to be playing out that way), it's important to not that SSI payment is capped at 102k. Therefore the total tax burden for them is nearer to 3%, and that's assuming that they are actually an employee at all. The end effect is that the total system proves to be far more regressive than I had shown before.

Topic 2: business payroll again on the cost of goods. Since almost all of the tax incidence fell on the employee in the previous topic, we cannot pass that cost onto the consumer of goods in the topic of consumer tax incidence.

Topic 3: gas/transportation taxes. This is important because, since gas is considered to be inelastic (people will buy it regardless of price), the tax incidence is considered to fall almost entirely on consumers. Average state plus federal gas tax is 47 cents per gallon (assuming $3/g, it's far from the 50% mentioned before). The previous numbers already factored in average individual tax incidence for personal use.

But let's get a number for gas tax paid by businesses for goods that fall on the consumer of those goods. Since gas tax falls on the consumer of the gas, the number of the incidence to consumer of goods will depend wholly on the price elasticity of those goods. Now all normal goods have slightly positive (inelastic) demand, we can assume that for poor people buying inferior goods, incidence will fall around 40% and for rich people buying luxury goods, incidence will be closer to 60%. A better estimate would elasticity in demand for each categories below, under different economic scenarios, etc, but I feel confident these numbers are close.

I have found a USDA study saying that the cost of transportation on the price of food in 1996 was 4%. Prices have tripled since then so 12/108= 11% share of price. Since food sets a high marker on transportation costs, lets round down to ten for all goods to simplify the math.

For rich people: 34%*60%*10%= a 2% transportation tax incidence from goods on total income. Plus 0% state payroll incidence.

For poor people: 34%*40%*10%= 1.4% incidence

That 34% number needs some work since I'm betting that the numbers prove to be far more regressive than I've shown. But the point is that gas tax, by far the highest tax passed to consumers, proves to be pretty low.

Topic 4: taxes on materials, very inelastic usually. At this point, we can assume the function has a pattern. The business that transports the materials will pass tax incidence, the material company will pass tax incidence, etc etc. The incidence is 34%*100%*10%*10%(assumed cost of materials) = 0.34%. Add to that .034%, .0034%, .00034%, and you get ~0.38% tax incidence of materials passed to consumers of goods as a percent of total income.

Topic 5: business taxes, 3.5%. 0.6% average incidence on consumer of total income.

Topic 6: inflation. "Tax" incidence I'm assuming is far less than actual inflation assuming most people spend if right away, or are getting higher returns on their money even after cap gains and such (which were included in the original estimates anyways). Any way I can think of it, even after factoring in incidence passed from goods that have sat on the shelf a while, total incidence couldn't possibly be more than half a percent.

I can hear an effective debate that the incidence is higher on this one. I'd like to see it thought out though.

Total taxes I've added on the rich: 6.5%

Total added to poor: 11.5%

Middle class we can assume falls in the middle near 9% additional hidden taxes.

Gracias for reading this and educating yourselves. I'm sure I'm missing a couple of minor hidden tax burdens, but I don't think that they'll add up over 1%. Under Obama, I can see those paying the highest taxes paying as much as 56% after all hidden taxes are included, assuming all their income is taxable. I based a lot of those business costs off the USDA study. The estimates are good for food, but a better estimate would break down industry averages much further, I know. Feedback is appreciated, numbers = higher quality feedback.

----------------------------

Notes: I overestimated tax incidence from business taxes by 0.2%, when considering that I need to add a variable of *0.93 to accomodate the 7% sales tax in CA.

I could apply the same idea to topic 5 as I did topic 4 to increase incidence. IE the real incidence could be 0.6% + 0.06% + 0.006% etc to get 0.6666%

re: Do the rich REALLY pay less than the middle class??

by Peary85

Sep. 30, 2011 9:27 am

Well based on the fact that they have the majority of the wealth in this country percentage of the taxes paid yes they do BUT ADDITIONALLY and most importantly they pay a SMALLER percentage of their annual income in taxes and THAT is where the issue is. Someone that is making $100,000 shouldn't be paying 39% of their income in taxes while someone making $1,000,000 is paying 18% of their income in taxes.

re: Do the rich REALLY pay less than the middle class??

by Martin Sandberg

Oct. 1, 2011 7:04 am

In fact the wealthy have already given back far, far more than they recieve. Lets look at Steve Jobs - he's created products that have allowed us all to be more productive and wealthy. Apple Computer gets only a small percentage of what people have created with their products. Think of how many new bands have been enabled by GarageBand! Think of all the movies that would never have been done without iMovie and Final Cut Pro. The Harry Potter series, grossing over a billion dollars was done on only a few dozen machines running Final Cut Pro.

"Sorry, but the egg comes first. The welfare state doesn't exist without productive businesses and workers to pay for it. Yes, we need bridge builders, park rangers and even a few postal workers, but our economic policies need to encourage wealth-creating productive industries, not crush them with the burden of an unproductive state."

re: Do the rich REALLY pay less than the middle class??

by bennycaires

Oct. 1, 2011 7:43 am

I have two words for the line, those making $50,000 to $60,000 paid an average of 6.3% in federal income taxes, and they ain't, happy birthday. That was my tax bracket for many of my working years before retiring and I still have the tax records to prove 29% is what I averaged and I wasn't alone. I discussed that subject with many of my colleagues during those years and we all payed the same no matter how creative our accountants were.

You tell us to, " stop believing all the trash you hear from the media and the lefty talk-show hosts" after you quote the media!!

Remember, the guy who ownes USA Today is a millionaire maybe a billionaire. I should know, he lives about ten miles from me.

re: Do the rich REALLY pay less than the middle class??

The US customer base is no longer needed, companies make their profit from a foreign customer base. Haiti is the model for US's future, except some Americans will freeze in addition to starving, But they're eating food, you can see it, and distended bellies..damn liberal press, mud cakes and pies have minerals in them, and fibre, but you'll never hear it in msm.

They might have a purpose in conjunction with the prison business. American commoners will be like pets, and maybe competing reality shows in the many different prisons will show whether severe punishment makes better killers, I mean gladiators, or compassionate imprisoned [you know like beds, food, sunlight] will make one a loyal killer, I mean gladiator.

re: Do the rich REALLY pay less than the middle class??

by Bad Company

Oct. 1, 2011 7:51 pm

Martin Sandberg- Lets go with your Steve Jobs example. First and foremost is our old classical line that those who invent stand on the shoulders of who went before them. Second is that those who invent have no relevance outside of a consumer market to buy their product. Third Is the premise we would not have had anything approaching the quality of this technology if it had not been for Jobs, when in fact his discoveries are perhaps only marginally better thanthat which would have filled the market otherwise

So yes I basically completely discount your version of the "great leaders of commerce" who divinely create paths of material goodness for the rest of us of us nearly lost folks At best they play a role which has a little more significance than the rest of us, but the idea that simply because they get a trademark on something makes them solely responsible for its impact on society is a delusion IMHO.it would be bad enough that if all the rich were like Jobs, but the situation is of course exponentially worse than that. Not sure what I would estimate in terms of the super rich being inventors of any sort. You want to give it a shot? Oh buy the way when I say invent I mean a tangible product or service and not just a computer algorhitm or other financial contraptions.

Sorry if it is has a tinge of sarcasm. I try not to do that, but I cannot seem to help myself on this subject

re: Do the rich REALLY pay less than the middle class??

by smilingcat

Oct. 1, 2011 10:40 pm

Hi,

Rich pay more in tax? well in absolute terms sure. Based on income after all the allowed deduction? Sure... But funny thing there are all these deductions. And try to address the average wage earners concern there is now a thing called Alternative Minimum Tax. If you make too much and take too many deduction... some of your deductions starts to disappear. This is supposed to keep the rich from paying less than the proletariats. To some extent it works.

Let's see social security tax. There is a cap around $106K. Anything more and you stop paying into it. How grand is that, my take home check bounced up by several hundred clams every two weeks after I hit that magic number. I always looked forward to that paycheck where it bounced up :) So this is one tangible example where rich is paying less in terms of percentage based on gross income excluding capital gain etc.

I also try to hold onto my stocks 365 days plus 1 day. Generally I go for 365 days plus 7 just so that there is no misunderstanding. Capital gain rate is so much better than normal income.

And if I lose money on stock, I can write it off 100% up to the gain I made that year or in excess of the gain I made by x amount of dollar. Anything more in loss is CARRIED OVER TO NEXT YEAR AND YEAR AFTER and YEAR AFTER...

There are other perks. BIZ TRIPS!!! write it off. Why do you think lot of professional conferences are held in vacay desitnation? Lake Tahoe, Aspen in winter. Maui in winter and summer... Fly in biz class is nice. Nice food. Nice big seat for someone small like me. Have chaffeur pick you up the airport. You don't even handle your luggage. How grand is that.

re: Do the rich REALLY pay less than the middle class??

Bad Company - Of course he stands on the shoulders of giants. We all do. The point that the article was making, that Ayn Rand made, that I'm making is - Given that everybody has access to the same tools, there are only a very few that see how to use those tools well. You want to see how valuable an algorithm is in your own life? Think of how much time Google has saved you and then multiply that by all its users and its obvious that Sergy & Brin have given people thousands of years of time, an incredible gift, indeed.

Robert Heinlein expressed it best:

"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded--here and there, now and then--are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as “bad luck.”"

These few, these incredible benefactors of us all, should celebrated! Instead, what do we see? We see them hated, denigrated and stealing from them advocated. It is time that this nonsense ended.

re: Do the rich REALLY pay less than the middle class??

by Bad Company

Oct. 2, 2011 6:39 am

Given that everybody has access to the same tools, there are only a very few that see how to use those tools well

This of course is nonesense. Clearly the privileged have acces to education process far superior to the lower classes. Are there exceptionally well educated folks that rise from poverty? Yes. But that oes not change the general prescription and surely to infer that the exception proves the rule is to defame logic So you can argue that point that society has set the stage for the so called exceptional among us to simply walk through. This of course the antithesis of your idea that only some are designed in a manner to break free from the medicroity the rest of us suffer from

Martin Sanberg said

You want to see how valuable an algorithm is in your own life? Think of how much time Google has saved you and then multiply that by all its users and its obvious that Sergy & Brin have given people thousands of years of time, an incredible gift, indeed.

Two points. I made a distinction between algorithms that serves in the production of goods and services and one that only serves to manipulate financial holdings. This statement fails to address such a distinction. Secondly this is just a repitition of your original argument regarding Jobs. Google's gift to us is no such thing. They relied on a long history of development and a well enough educated class of consumers to buy or utilize their products. Societies move forward and, Google fills a niche, but is not a creator of one out of whole cloth

Heinlein's quote is the classic mantra of the abused rich and the jealousy of the masses.

Still waiting to hear the question of how many of the super rich are inventors of tangible goods and services which is the eample you are giving

re: Do the rich REALLY pay less than the middle class??

I would further contend that poverty is not the normative condition of man, waiting for right wing saviors. World trends bear out that free market economics are bad for all nations, and where "governments interfere" with the market the result has often been quite positive. South Korea, Germany, and Sweden are all great examples of this. The absolute growth rates in these countries was startling, especially South Korea, compared to the United States and England for the '80's and even the "boom" 90's. Remember that much of the supposed economic growth in the U.S. was specifically in the financial sector, a non producing sector, at the direct expense of infrastructural investments in real goods and services. Many corporate firms that are associated with direct production oriented activities , such as GM, invested heavily in finance (GMAC) as opposed to real innovation. This shift cooked the books so to speak as it made them look financially secure even as they were falling far behind the curve in long term productive viability. The endgame was the crash of the house of cards which laid bare the over reliance on non real financial assets. If we are to continue to exalt advanced capitalism and market based economics we need to re-tether finance to real goods and services. This means some combination of triggers that force investers to put a percentage of aftermarket profits back into real goods and services at a certain point of profitability, and taxation that makes capital flight an expensive propositon and forces investers to think of long term rather than short term profitability. The point of a market is to allow for complex transactions over numerous industrial sectors, not to be a casino. No market exists without rules. If Wall Street would like us to provide them with a place to conduct their business (that is what government does by enforcing rules of the road) then they have to reciporocate and invest back in America.

re: Do the rich REALLY pay less than the middle class??

by douglaslee

Oct. 2, 2011 7:06 am

The rich did create CDS, CDOs, new derivitive algorithms, and mers system to hide fraudulent mortgages and junk bonds, they also passed the banking reg that keeps college loans from ever being forgiven, now why would anyone not sing their praise?

re: Do the rich REALLY pay less than the middle class??

Bad Company - Of course he stands on the shoulders of giants. We all do. The point that the article was making, that Ayn Rand made, that I'm making is - Given that everybody has access to the same tools, there are only a very few that see how to use those tools well. You want to see how valuable an algorithm is in your own life? Think of how much time Google has saved you and then multiply that by all its users and its obvious that Sergy & Brin have given people thousands of years of time, an incredible gift, indeed.

Robert Heinlein expressed it best:

"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded--here and there, now and then--are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as “bad luck.”"

These few, these incredible benefactors of us all, should celebrated! Instead, what do we see? We see them hated, denigrated and stealing from them advocated. It is time that this nonsense ended.

I wonder why so many people enjoy thinking in these logical tautologies of human greatness.

re: Do the rich REALLY pay less than the middle class??

The current conflict about whether or not to increase the income tax rate on incomes over a million dollars a year reminds me of an experience I had nearly twenty years ago.

It was a snowy evening on the Upper East Side of Manhattan and I was having a drink with a wealthy friend of mine. President Clinton had just succeeded in getting his tax increase through the Congress. I mentioned the conventional economic wisdom that raising the top rate would discourage the well-off from working as hard as they might have at lower rates.

My friend’s reaction was memorable. “Let me tell you something about the rich,” he said. “See that snow bank across Fifth Avenue from us? If I told you there was a twenty dollar bill in it that you could have if you were willing to go on your knees from here to there to claim it, you would laugh at me. If I told the same thing to—and here he referenced a couple of billionaires—they’d be fighting each other to get out the door.” (No, Virginia, they are not, in the main, much like Warren Buffet.)

His point of course was that the rich often get that way because they are single-minded about making money. Indeed, one threshold question for Wall Street job-seekers is “How much do you want to make a lot of money?”

re: Do the rich REALLY pay less than the middle class??

by bobbler

Oct. 2, 2011 7:39 pm

USA TODAY = CON.. All the media outlets are corporate owned, and therefore follow in the direction of FAUX NEWS. As for the lefty shows being unbelieveable, everytime I research an issue I find the liberals are telling the truth and the conservatives are "LYING." Al Frankins book shed some much needed light on this subject. I am sure some people in this forum will explain who "really" really pays more taxes..

Quote justthefactsmaam:

No they don't. This is from USA Today. It's NOT from Fox or Wall Street Journal.

Here's a quick summary:

"There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that's less than 1% of the nearly 237,000 returns with incomes above $1 million."

and

"The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4% of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9% in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3%."

re: Do the rich REALLY pay less than the middle class??

by DRC

Oct. 3, 2011 8:52 am

I began laughing with the idea that USA Today is a solid liberal source, much less an actual newspaper. Of course, there are few of them left today, and the pipeline of columns from the Rightwing Foundations and their corporate ownership makes them devoid of serious criticism of anything structural about power.

If the rich had all the money, they would pay all the taxes. Not all the user fees and premiums on the enclosed Commons, but if we had no incomes we would not pay the IRS. We would not pay our Social Security tax either without a job. Even though it is really an insurance premium we get from the State rather than a "tax."

As Poly tries to remind the cons, the redistribution of wealth is a necessary element in a sustainable and successful economy. If the wealthy were up to the task, and were they able to know where the investments were needed most, we could dispense with the income tax and let them be philosopher/kings of commerce. Does anyone believe their present pattern of investment represents anything of the kind?

This is why I want to help them by relieving the wealthy of the burden of superhumanity. They can return to being ordinary human beings who have tons of money. They will get to keep pretty much all they can spend enjoying their wealth, and the Golden Goose will continue to lay a certain number of golden eggs for them. They just have to be content with being "winners." They have to pay for the upkeep on their American Dream.

Unproductive wealth is like obesity. It creates bad economic health and cancerous growth along with withering. What the cons cannot accept is that this fact is not about the morality of capitalism or socialism or how worthy any risk taker has been v how ruthless. If the mob paid off the poor, they would be helping the economy. There would be other problems, but money would be getting into the hands of people who need real things of value.

The real issue is democracy and governing ourselves. Economic design can make authoritarian capitalism or socialism the rule. Unless economic design serves the purpose of helping democracy, it fails to observe the first element of social responsibility in our American social contract. I think the Pledge still presents that democratic vision as the point of our loyalty and common American bond. It is easy for me to see the conflict between corporatism and democracy; and capitalism is not what corporatism really is. I understand why some others fear authoritarian state models of social organization and design; but this does not make the state the problem. It just makes how we use the state to have a democracy the challenge.

Those who believe that economic realism precedes social realism have made slavery rise again. Debt slavery is our onerous lot in this Wall St. nightmare. What we have to do for money compromises us rather than leads us to humane and successful lives. Mammon and Mars are harsh gods.

re: Do the rich REALLY pay less than the middle class??

by D_NATURED

Oct. 3, 2011 11:33 am

Bad Company - Of course he stands on the shoulders of giants. We all do. The point that the article was making, that Ayn Rand made, that I'm making is - Given that everybody has access to the same tools, there are only a very few that see how to use those tools well. You want to see how valuable an algorithm is in your own life? Think of how much time Google has saved you and then multiply that by all its users and its obvious that Sergy & Brin have given people thousands of years of time, an incredible gift, indeed.

Here is a textbook example of conservative delusion. In order to believe that the poor are just lazy, they must pretend that once removed from their home uterus, all babies have access to the same tools. As ignorant as that idea is, I wonder how much credibility the argument would have had we democrats never instituted the better known socialist programs our country enjoys. Isn't it what we on the left have done that even gives the impression that there is some equality?

I'm just wondering what sort of algorithem could be used to determine how far the average conservative has his head up his ass to begin to believe that what you said is the case. Given the evidence linking childhood nutrition to learning achievement as well as that showing correlation between school funding and achievement in the USA, I'm wondering which country Mr Sandberg calls home. Sweden?

I assure you, Mr. Sandberg, that it IS the liberal goal to have all children have access to the same tools, but an already racist- or, at the least, classist- education system that is constantly under additional attacks by conservatives has made that impossible. Ask yourself, honestly, if you think the Republican party has done anything to correct the lack of equal access to the "tools" of success. Where do they stand on free college for everyone who is able to learn? Where do they even stand on making sure every public school child has what they need to learn?

I could go on about your drooling on the feet of Jobs and the google guys but it would not help you see the light. I could ask you why the graduation rates for black and hispanic communities- who apparently have access to the same tools- are lower than that of their rich, white counterparts, but it would not stir your guilt pangs. I fear you already "know" a lot of things that are demonstratably wrong but won't admit it. I think you have accepted a perspective that assumes all wealthy people are innovators and all poor people are lazy or stupid. And, while I'm sure those beliefs do a great job of mitigating any responsibility you might feel to your fellow citizens, they don't serve the country at all.

The problems in this country are not a lack of desire by poor people to be rich. The problems are a lack of desire by rich people to be human.